Amtrak’s For-Profit Regulation

In 1906, Leonor Loree, an accomplished railroad executive, examined the dilapidated Kansas City Southern Railroad that he had been hired to rehabilitate. Dismayed, he permanently enriched American slang by exclaiming: “This is a helluva way to run a railroad!” Judge Janice Rogers Brown of the U.S. Court of Appeals for the District of Columbia Circuit, the nation’s second-most important court, recently said, with judicial decorousness, essentially the same thing about Amtrak.

She was not referring to its 46 consecutive years of operating losses, which include $306 million last year, and more than $16 billion since 1970, when Congress created Amtrak as a federally chartered, for-profit corporation. Rather, Brown was referring to how Congress, by piling “anomaly on top of anomaly,” has made Amtrak into a “wholly unique statutory creature” — one empowered to regulate its competitors. Amtrak illustrates the administrative state’s routine drift into constitutional impropriety.

In 2008, Congress passed the Passenger Rail Investment and Improvement Act (PRIIA), which endowed Amtrak with the powers of a regulatory agency that makes decisions, in conjunction with the Transportation Department, about scheduling, uses of available tracks, maintenance and other metrics and standards that compel certain behavior by the entire U.S. rail industry. Freight rail entities, which actually are private, understandably objected, and the D.C. Circuit agreed with them that PRIIA was an unconstitutional delegation of governmental regulatory power to a private entity.

In 2015, however, the Supreme Court issued a through-the-looking-glass ruling worthy of Lewis Carroll’s Humpty Dumpty (“When I use a word, it means just what I choose it to mean — neither more nor less”). The court acknowledged that Congress has designated Amtrak a private corporation directed to maximize revenue in order to minimize the need for government subsidies. So, Amtrak is required to be self-interested. Yet the court held that because Amtrak is indirectly controlled by Congress, however remotely, it can also be considered a government entity.

Passive courts, accommodating the administrative state’s activities, are permissive about agencies’ regulatory behavior that blurs the line between legislation and regulation. But the Supreme Court returned the freight operators’ challenge to the D.C. Circuit for answers to some remaining questions, including this one implicating the Fifth Amendment’s due-process guarantee: May an economically self-interested entity exercise regulatory authority over competitors?

Writing for a unanimous three-judge panel, Brown rejected “a simple way to resolve this case,” refusing to adopt the naive hypothesis that “Amtrak’s political accountability — remote as it is — removes the taint of any potential for bias.” Instead, Brown wrote: “Our Constitution’s ingenious system of checks and balances assumes government officials will act self-interestedly.” She cited Alexander Hamilton from the first Federalist Paper: It would be nice if government officials’ decisions would always be “unbiased by considerations not connected with the public good,” but this is something “more ardently to be wished than seriously to be expected.”

Regarding Amtrak, Brown noted, “Congress delegated its legislative power to an entity that it designed to be the opposite of ‘presumptively disinterested.’ ” Among the chief concerns of the framers of the Constitution “were questions of who should be permitted to exercise the awesome and coercive power of the government.” The due process clause, wrote Brown, “puts Congress to a choice: its chartered entities may either compete, as market participants, or regulate, as official bodies.”

The obvious way to avoid such dangerous jumbles of public and private responsibilities is to never have such government-chartered entities as Amtrak (and Fannie Mae, Freddie Mac and others). “Indeed,” Brown warned, “government’s increasing reliance on public-private partnerships portends an even more ill-fitting accommodation between the exercise of regulatory power and concerns about fairness and accountability.”

This reliance is another unpleasant feature of America’s predictable future. For almost eight years, Barack Obama has had the courage of Woodrow Wilson’s anti-constitutional conviction that the separation of powers is an anachronistic inconvenience. It supposedly denies Americans the blessings of what then-professor Woodrow Wilson of Bryn Mawr College called administrators with “large powers and unhampered discretion.” It will be at least four years before even the possibility of a president who thinks otherwise.

There might never be another such president, now that the Republican Party is embracing a candidate for chief executive who embodies Wilson’s enthusiasm for unbounded executive power. Now that both parties regard constitutional conservatism as an inconvenient anachronism, Amtrak is a harbinger of future bipartisanship: There will be the steady permeation of ostensibly, but not really, private entities with government’s presence, which for a century has been progressives’ consistent goal.